KUALA LUMPUR: Malaysian retailers saw sales contract by 0.8% for the fourth quarter of last year (4Q14) compared with the year-ago period, as consumers held back spending.
This has been the lowest retail sales performance since 2009 when it registered a 0.8% growth. It was also lower than the estimate by Malaysia Retailers Association (MRA) members and retail research firm Retail Group Malaysia (RGM) of 5.5% made in December last year and 4Q13’s 3.9% retail sales growth.
This latest quarterly result brought total retail sales in Malaysia for the whole of 2014 increasing by 3.4%, down from 4.5% in 2013.
In its Malaysia Retail Industry Report for March 2015, RGM said the school holiday, year-end sale festival, Christmas and lower fuel prices in December 2014 had all failed to lift sales in 4Q14. Consumers had not converted their savings into consumption.
“Furthermore, the [impending] implementation of the goods and services tax (GST) next month did not stimulate consumption during the last quarter [of 2014]. Retailers used heavy discounts to encourage consumers to shop, but failed to generate higher sales. During the quarter, many retailers suffered declines in profit margin growth,” RGM said.
On a retail subsector basis, RGM said the other specialty stores subsector (including retailers selling photographic equipment with photo processing services, optical products, second-hand goods, health and fitness equipment, toys, souvenirs, duty-free goods, arts and crafts as well as food service) recorded the poorest sales performance in 4Q14, with a 6.7% contraction from the year-ago period.
“The department store-cum-supermarket subsector achieved a surprising higher growth rate of 7.9% during 4Q14, while the department store subsector suffered a major drop in retail sales by 5.7%,” it said.
The fashion and fashion accessories also recorded a 2.2% decline in retail sales. The supermarket and hypermarket subsector, meanwhile, reported a marginal growth of 1% during 4Q14.
Nevertheless, MRA members are hopeful of a recovery in 1Q15 with a growth estimate of 5.8%.
“[For one,] the department store-cum-supermarket operators are expecting to maintain their growth momentum with an increase of 6.2% for 1Q15,” said RGM. “Department store operators are expecting a turnaround in their businesses with a growth rate of 1.1% for the first three months of this year, while supermarket and hypermarket operators are expecting a strong growth of 7.9% for 1Q15.”
Retailers in the fashion and fashion accessories subsector are also anticipating a 12.1% sales growth and the other specialty stores subsector is aiming for a 4.7% growth during 1Q15.
Meanwhile, RGM has revised downwards its projected retail sales growth rate for the second time to 4.9% from 5.5% for the whole of 2015, as it sees consumer spending as the “greatest challenge” for the year.
“For 1Q15, retail sales were expected to be higher due to the Chinese New Year festival, employees receiving bonuses and the distribution of BR1M 4.0 to 7.2 million Malaysians. Malaysian consumers were expected to buy early in the year in anticipation of higher prices after April 2015,” it noted.
“However, retail sales performance during the first two months of this year was below expectation as consumers were confused by different public messages on the prices of retail goods and services after March 2015,” it said.
RGM said for 1Q15, retail sales growth rate is estimated at 3.8%, which is lower than the projection made by MRA members of 5.8%.
“Malaysian consumers will get used to GST by the last quarter of 2015. Retail spending will return to normal again by this period. Retail is expected to recover strongly with a 6.9% growth rate,” it added.
This article first appeared in The Edge Financial Daily, on March 26, 2015.